RuPay gaining currency irks US companies MasterCard & Visa

RuPay Card have been issued in 1.78 crore accounts.US card companies MasterCard and Visa have complained of an invisible mandate to keep them out of Jan Dhan Yojana, the government’s financial inclusion programme, and demanded a level playing field with government-backed card issuer RuPay.

Stung by a sharp rise in cards issued by RuPay, thanks to Jan Dhan, MasterCard and Visa say they have asked Reserve Bank and the government to consider their services, which are cheaper than that of the local card issuer.

Ari Sarker, co-president, Asia Pacific, MasterCard, said his company wants to get an equal opportunity to participate in Jan Dhan Yojana, touted by the government as the world’s biggest financial inclusion programme.

He added that banks are aware of their cost but cannot do anything as there appears to be a mandate in favour of RuPay. He added that their pricing is 30% cheaper than the national scheme for 90% of the market comprising ATM transactions.

“The market is not open and competitive in its entirety, only in parts,” Sarker said in an interview. “It is not that nobody was interested in this space, and therefore, by default, the government was left with no choice (but to give NPCI the mandate to issue new cards). Banks are aware but there is an invisible mandate that we are not able to play in that space,” Sarker said.

MasterCard cut prices in 2014 as it shifted focus from higher margins to larger volumes noting an increase in number of digital transactions.

Sarker’s comments were echoed by rival Visa. “There is no official mandate from the government, but yes, there is a preference for RuPay for the Jan Dhan financial inclusion scheme,” said TR Ramachandran, group country manager, India and South Asia, Visa.

“We have always been saying that we need a level playing field in India to build a scaleable, inter-operable network. Currently, on a basic ATM usage we are slightly cheaper than RuPay, and if there is more competition in India it will only help in reducing cash usage,” he said.

Visa declined to reveal its pricing citing “competitive reasons.” However, a senior official from the company said Visa too is priced lower than RuPay, but the payment space in India is not driven purely by competition.

“The only reason RuPay has added so many is not because it is cheaper, but because there is an invisible mandate from the government to issue only RuPay cards. More than half of the cards issued have not been used. NPCI can claim to issue millions of cards. But these cards are not as a result of competition, but due to a monopoly.

It does not benefit the market in anyway because they are not being used,” this official said speaking on the condition of anonymity.

MasterCard has a total of 180 million credit and debit cards in India, Sarkar said, giving it 28% market share in the total 633.66 million cards in use in the country. In contrast RuPay has more than 222 million debit cards in circulation in November, giving it around a 35% share after issuing its first card only in March 2012.

Sarker said he respects the government’s decision to go with the RBI-backed RuPay card for its financial inclusion Jan Dhan scheme and welcomes competition from a home grown player, but seeks a level playing field. “We are in talks with the government and the RBI. These conversations are happening at various levels. We think we will get a fair hearing”

Visa’s Ramachandran too said that their ultimate aim is to displace cash which corners at least 95% of the payments market in India. Sarker estimates that the total payment flows in India is at $1.5 trillion but only 3% of it is through the electronic channels.